Three Important Energy Reality Checks

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There were three important reality checks in the energy sector last week. First, the Natural Resources Defense Council (NRDC) and Edison Electric Institute (EEI) issued a joint statement of eight recommendations aimed at policy-makers about redefining regulated electric utility business models and rate structures to accommodate privately-owned distributed energy resources (DER). DER is acknowledged to pose real threats to existing utility revenue streams. In the current business model, utilities make money by selling electricity, and any reductions in sales via DER hurts their bottom lines – the infamous death spiral. This explains in part why some utilities have been opposed to net metering and other programs that encourage distributed generation. Of course, some opposition also stems from the concerns about control of these assets in the distribution grid, but there are a number of Smart Grid technologies that are addressing these concerns by allocating operational intelligence and control in a distributed manner as opposed to a centralized command and control infrastructure. Utilities, as regulated monopolies, can’t make all the necessary business model changes on their own. Regulators need to participate with creativity and courage – creativity to go beyond “business-as-usual” and courage to effectively engineer changes in regulations and institutional mindsets.

Second, coal ash made the news again, in its usual dramatic way – another spill, another river fouled by a physical byproduct of burning coal. Duke Energy is the subject of a criminal investigation as an even regulatorily-lax state like North Carolina realizes that healthy rivers are rather essential to other businesses and even to residents in the state. The reality is that there’s no such thing as clean coal, and there’s no such thing as clean coal ash. Coal ash contains arsenic, selenium and other toxins that cause cancer in creatures across the ecosystem. Containment facilities for coal ash, like much of our aging infrastructure, are at the end of their engineered lifespans. Ratepayers in the utilities that choose coal for a fuel will probably see rate hikes to address improved containment, or suffer the consequences of continued pollution of ground water sources. Ratepayers in the utilities that continue to burn coal in the future should expect to bear the costs these very tangible byproducts.

Third, the harsh winter weather highlighted the downsides of natural gas. It suffers from three vulnerabilities – it’s still a fossil fuel that emits dangerous gases into our already ailing atmosphere; it suffers from price volatility that results in unpredictable costs to consumers; and it suffers from an inadequate pipeline infrastructure to transport it to the locations with highest demand. A joint Stanford/Massachusetts Institute of Technology/National Renewable Energy Laboratory study recently assessed that natural gas is not as clean as its proponents claim. It emits methane, which inflicts even more long-lasting damage to our atmosphere than carbon dioxide (CO2). Natural gas is at a 4 year high in price – in a time of abundant supplies. These historic highs also reflect the lack of pipeline capacity to carry gas – resulting in localized price spikes in New York and New England regions. The infrastructure issues also contribute to leaks throughout the transmission system – again spilling more methane into our atmosphere. This is no bridge fuel to the future unless you like your bridges unpredictably volatile and unsafe.

These three reality checks help cut through the noise and disinformation produced by the fossil fuel industry and proponents of the energy status quo. The EEI/NRDC recommendations can help propel a transition to clean renewable sources of energy that don’t have downsides of poisonous byproducts or price volatilities that wreak havoc on environments or business and residential budgets. Ratepayers can help too by encouraging regulators to incorporate these recommendations into their policy decisions.